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Investment Performance

Investment Performance

The SEC’s New Advertising Rule – Presenting Performance

Wondering how to present performance under the SEC's New Advertising Rule? Do you need to use composites? The answer is…
Investment Performance

When to Use Time-Weighted Return (TWR) vs. Money-Weighted Return (MWR)

When should you use a TWR and when is it appropriate to use a MWR (IRR)?
Investment Performance

What is the Information Ratio?

The Information Ratio demonstrates a strategy's excess return, scaled by risk. Rather than using total risk or systematic risk, the Information Ratio uses…
Investment Performance

What is the Sortino Ratio?

The Sortino Ratio is similar to the Sharpe Ratio as it is used to compare and rank managers with similar strategies. However, unlike Sharpe, the Sortino Ratio measures the incremental average strategy return over a minimum acceptable return per unit of downside risk rather than total risk. Because of this difference, the Sortino Ratio may […]
Investment Performance

Investment Performance and Risk Statistics

The recent market volatility probably has you wondering how your strategy has fared through this unprecedented time. Disruptive market environments tend to reveal critical information about active managers that help investors see those that truly add value, and those that don’t. So, what should you do to evaluate your actively-managed strategy and how can you […]
Investment Performance

What is the Sharpe Ratio?

The Sharpe Ratio is calculated as the strategy’s mean return minus the mean risk-free rate divided by the standard deviation of the strategy. The Sharpe Ratio measures the excess return for taking on additional risk. As one of the most popular performance appraisals measures, the Sharpe Ratio is used to compare and rank managers with […]
GIPS Compliance Investment Performance

Investment Performance Outlier Testing

For any firm that aggregates portfolios of the same strategy into a composite, or otherwise groups portfolios by mandate, how do you know that each portfolio truly follows that strategy? The answer is outlier testing. Why Utilize Composites? The GIPS standards require firms managing separate accounts to construct composites, which aggregate all discretionary portfolios of […]
Investment Performance

Arithmetic vs Geometric Mean: Which to use in Performance Appraisal

Most performance appraisal measures utilize a mean return in its calculation. This can be in the form a geometric mean or a simple arithmetic average. Because both types of means can be used, it raises the question: Which measure should be applied? When calculating performance, we are accustomed to calculating returns geometrically (i.e., including compounding). […]
GIPS Compliance Investment Performance

How to Construct Composites

GIPS compliant firms are required to calculate and present composite performance, rather than presenting the performance of a model or single representative account. The purpose of this is to ensure investment managers are presenting an accurate representation of their ability to implement a strategy, rather than “cherry-picking” their best performing portfolio. As discussed in our […]